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GM's Way Out

The automotive giant is troubled, but a turnaround is far from impossible.

General Motors(NYSE:GM) hasn't exactly been a font of good news lately. Another bad sign emerged on Tuesday when reports surfaced that Philip Murtaugh, chairman of GM's China unit, resigned, even as demand for vehicles in China is thought to be slowing. The automotive giant's troubles are substantial, although a turnaround may be within its grasp if the company plays its cards right.

GM's first priority has to be getting customers excited again. DaimlerChrysler(NYSE:DCX) is the most obvious example of the power of new styles in improving a company's fortunes. The prospects for GM on this front, as hard as it may be to believe, aren't terrible. The company has some stylish convertibles coming soon that should ignite some interest and generate new sales. Unfortunately, the market for such toys isn't huge, so GM needs to do a lot better with its sedans -- models such as the new Buick LaCrosse simply aren't as innovative as they could be.

At the same time, General Motors should probably eliminate some of its brands, as David Meier has commented. The company's array of nameplates just makes it too difficult to manage costs. Even if GM does manage to keep expenses to a minimum by employing interchangeable parts, this commonality tends to lead to homogenization among brands anyway, eliminating the distinctive features that might have attracted different buyers.

Finally, GM has to get serious about its much-ballyhooed efforts to create hydrogen-powered vehicles. Granted, the hydrogen economy won't happen overnight. But rapidly developing economies in India and China and high oil prices may be catalysts for sooner-than-anticipated adoption of such vehicles. The company's recent deal with the U.S. Department of Energy is a positive sign that fuel cell-driven cars remain on General Motors' radar.

There's little doubt that General Motors' near-term future looks pretty grim. But beaten-down U.S. carmakers have a history of staging turnarounds, and GM's case looks far from terminal.